With climate change reshaping some of the world’s most trafficked shipping routes, we may need to establish alternative transport links and shipping hubs to prepare for the future of global trade. Other challenges are also affecting certain shipping routes, showing the need to develop alternatives. The maritime sector manages between 80 and 90 percent of the world’s trade, meaning that any disruption can significantly affect global supply chains and lead to major delays for a wide range of sectors.
In recent years, some of the world’s biggest trade routes have faced major challenges that have led to significant disruption and made the need for alternative routes increasingly evident. Since November 2023, there have been more attacks on ships in the Red Sea, while the Black Sea has been disrupted by the war in Ukraine. At the same time, trade has been limited in the Panama Canal due to climate-induced droughts. With three major trade routes all facing major challenges, it suggests that greater diversification may be needed to prepare for the future of global trade.
In 2023, around 22 percent of global seaborne container trade passed through the Suez Canal. However, as companies increasingly feared the risk of attack in the Red Sea, more firms decided to avoid the route, instead using alternative, longer routes around Africa. The Suez Canal contributed approximately $9.4 billion in revenue for Egypt in the 2022/23 fiscal year, or around 2.3 percent of the country’s GDP. The Red Sea crisis prompted a 40 percent decrease in Suez Canal revenues the following year, with spillover effects for other countries in the region.
In terms of climate change challenges, more frequent instances of drought in Central America have led to lower water levels in the Panama Canal, which has reduced traffic along the route in recent years. The Panama Canal relies on several ascending locks that draw water from a nearby lake. However, lower-than-average rainfall has lowered water levels in recent years, meaning boats have, at times, been forced to reduce their cargo loads by 40 percent to pass through the canal. This led to delays as well as increased carbon emissions. This has led several countries to resort to using alternative land and rail routes to move freight.
Many companies have sought quick fixes to transport goods in the face of disruptions along major trade routes, such as land travel or the use of alternative, longer routes. This has, in some cases, driven up carbon emissions. As container ships are forced to travel longer distances to avoid certain routes, many increase the speed at which they travel, rather than using a “slow steaming” approach to reduce emissions. Just a 1 percent increase in speed can increase fuel consumption by as much as 2.2 percent, showing the potential impact of the change.
However, perhaps somewhat ironically, climate change is also contributing to the formation of alternative, new trade routes. As more polar ice melts, increasing sea levels, we are seeing new shipping routes open up. Two new Arctic trade routes are emerging: the Northern Sea Route (NSR) and the Northwest Passage.
The NSR, which passes along the Russian border, could be totally ice-free as soon as 2030. This route would reduce a one-way trip between East Asia and Europe by around 9,000 km, which could reduce travel time by as much as two weeks. The Northwest Passage runs along the Canadian border. Using this route could reduce travel time from North America to the Bering Strait. However, access to these routes remains limited, as the extent of ice melt varies by season and year, meaning they may not always be reliable. There are also risks associated with traversing the icy waters in remote regions of the world that lack key infrastructure.
China is one of the countries exploring the new trade routes, as it sails a cargo ship along the NSR. In September, China sent the Istanbul Bridge container ship on an 18-day trip from Ningbo-Zhoushan port to Felixstowe in the U.K., using Russia’s northern border route to test the waters and decide whether it would be possible to launch a regular, albeit seasonal, service between Asia and Europe along the route. If successful, the use of the route could help reduce carbon emissions by reducing the distance and time needed to traverse the new route. Although the potential environmental impact of greater maritime activity in the region is still unclear.
Some of the world’s oldest and busiest shipping routes are facing greater challenges, from climate change to the spillover effects of conflict, leading shipping companies to seek alternative trade links. Trade disruptions in recent years have made the need to diversify trade routes increasingly evident, although it is still unclear how this may be sustainably achieved.
By Felicity Bradstock for Oilprice.com